Dow Jones futures rose 0.12% to near 48,500 in European hours on Tuesday. S&P 500 and Nasdaq 100 futures gained 0.16% and 0.28% to near 6,930 and 25,600.
US stock futures followed gains from Monday’s session on Wall Street. The Dow Jones rose 0.63%, while the S&P 500 and Nasdaq Composite increased 1.02% and 1.23%.
Oil Prices Ease Inflation Fears
Lower oil prices reduced inflation concerns and softened expectations for tighter Federal Reserve policy. Comments from Fed Governor Stephen Miran said the Iran-related energy shock has not affected long-term inflation expectations, and he expects price pressures to return to the target within a year.
US President Donald Trump said Iran had made contact and wants to resume negotiations. Vice President JD Vance referred to ongoing diplomatic efforts and said weekend talks were constructive and improved understanding of Iran’s position.
US Treasury Secretary Scott Bessent told Semafor on Tuesday the US should “wait and see” before cutting interest rates. He said he is confident recent price increases will not become embedded in inflation expectations.
Attention is also on upcoming bank earnings, including JPMorgan Chase and Wells Fargo. Goldman Sachs fell nearly 2% on Monday after missing revenue estimates in fixed-income, currencies, and commodities trading.
Volatility Selling Opportunity
We should consider selling some volatility as the immediate risk of a wider US-Iran conflict appears to be fading. Implied volatility in options, measured by the VIX, likely rose on the initial tensions, much like it spiked above 20 during similar geopolitical scares in 2025. With potential de-escalation, instruments like the VIX could fall back toward the mid-teens, making strategies like selling credit spreads on the SPX attractive.
The most direct impact of easing Middle East tensions is on crude oil, and we should position for lower prices in the coming weeks. Oil prices, which recently surged toward $95 a barrel on the conflict premium, could retreat back toward the low $80s. Buying puts on the United States Oil Fund (USO) or shorting crude futures are straightforward ways to trade this expected drop in risk premium.
Given the easing inflation concerns, we can take a cautiously bullish stance on the broader market indices. The Nasdaq leading the way suggests a risk-on appetite is returning, a welcome change from the rate-hike fears that dominated the market throughout 2025. We can look at buying call spreads on the QQQ to participate in the upside while defining our risk ahead of key bank earnings.
The mixed signals from the financial sector warrant a specific strategy for the upcoming bank earnings reports. Goldman Sachs’s weak trading revenue is a red flag, but JPMorgan could report strong results, creating a volatile situation for the sector. A long straddle using options on the Financial Select Sector SPDR Fund (XLF) would allow us to profit from a large price swing in either direction after the reports are released.
